IBIT, FBTC, ARKB, BITB: time to buy or sell Bitcoin ETFs?

Spot Bitcoin ETFs continued doing well this week as investors reacted to the encouraging statement by the Federal Reserve. 

These funds saw inflows for four consecutive days through September 17 when they added over $186 million in assets. Altogether, they have added over $500 million in assets in the past four days, bringing the total inflows to $17.4 billion. 

Most of these ETFs have added assets, with the iShares Bitcoin Trust (IBIT), Fidelity Bitcoin Trust (FBTC), Ark Bitcoin Trust (ARKB), and Bitwise Bitcoin Fund (BITB) having over $20 billion, $10.6 billion, and $2.29 billion, respectively.

On the other hand, the highly expensive Grayscale Bitcoin Trust (GBTC), which has an expense ratio of 1.50%, has had cumulative outflows of over $20 billion.

Federal Reserve interest rate cut

The main catalyst for these ETFs this week was the decision by the Federal Reserve on Wednesday. As was widely expected, the Fed decided to cut interest rates by 0.50% and hinted that more cuts were coming.

The Fed justified the rate cut noting that the labor market was deteriorating and that inflation was heading to the 2% target. 

Last week’s US inflation data showed that the headline Consumer Price Index (CPI) dropped from 2.9% in July to 2.5% in August while core CPI remained at 3.2%.

There are signs that consumer prices will continue moving downwards. In the first place, the price of crude oil has drifted downwards, with the West Texas Intermediate (WTI) falling below $70 a barrel. Data by Triple A shows that the average gasoline price has moved to $3.215, down from $3.88 a year earlier.

China remains in a deflationary environment, a notable situation since it is one of the biggest exporters to the United States. 

Spot Bitcoin ETFs like IBIT, FBTC, ARKB, and BITB will likely attract more inflows in the near term if inflation continues falling. 

Bitcoin has more catalysts

The other main reason why the price of Bitcoin will likely do well is that it has more bullish catalysts. 

First, there are signs that many large Bitcoin holders are not selling, with some of them continuing to buy. A good example of this is MicroStrategy, which spent another $1 billion to buy Bitcoin this month. It is now raising another fund to continue the purchases.

Bhutan, a small country with a GDP of about $3 billion and a population of less than 1 million, has allocated over $800 million to Bitcoin. In the future, as more countries work to diversify their holdings, there is a likelihood that they will continue to embrace Bitcoin.

Blackrock made the case for Bitcoin as a diversifier in a white paper this week, noting that the coin outperforms stocks and gold in terms of geopolitical issues. It also noted that Bitcoin was a highly uncorrelated alternative asset.

Second, Bitcoin ETFs could do well because of the falling amount of reserves. Data by CoinGlass shows that the number of Bitcoin balances in exchanges dropped to 2.35 million this week, down from over 2.5 million earlier this year. 

Falling reserves is a positive thing since it means that many investors have moved their coins to external wallets like MetaMask. In most periods, Bitcoin tends to see more volatility when supply in exchanges is rising, as we saw recently when Germany and Mt. Gox were selling their coins.

Third, Bitcoin will likely benefit from the upcoming US election whether Trump or Harris wins. Polymarket data shows that Harris has extended her lead to 52% against Trump’s 47%. 

While Trump is seen favorably than Harris in the crypto community, the reality is that Bitcoin is not a respecter of who is in the white house. Historically, the coin has done well regardless of the president. 

Bitcoin surged to a record high of over $73,800 earlier this year during Joe Biden and Gary Gensler’s term. It also rose to a record high of over $34,000 at the twilight of Trump’s presidency.

Bitcoin invalidated the death cross

Spot Bitcoin ETFs may do well because of technical reasons. Most notably, on the daily chart, there are signs that Bitcoin has avoided forming a death cross pattern when the 200-day and 50-day Exponential Moving Averages (EMA) cross each other while facing downwards. 

Instead, Bitcoin has tilted upwards and is even about to form a golden cross if more gains continue. The last time it formed a golden cross led to double-digit gains. Also, the last time the Fed cut rates in 2020, Bitcoin surged to a record high of $69,000.

There are also signs that Bitcoin has been forming a bullish flag chart pattern, which is characterised by a descending channel after an asset makes a big bullish move. Therefore, if this happens, Bitcoin will likely continue rising as bulls target the upper side of the channel at $67,500.

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